March 2, 2018 / 3:48 PM / 3 months ago

FOREX-Dollar tumbles as U.S. tariff plan ignites trade war fears

    * U.S. tariff concerns weigh on risk appetite
    * BoJ's Kuroda says would consider easy monetary policy exit
    * Graphic: World FX rates in 2018

 (Updates prices, adds comment, changes byline, dateline;
previous LONDON)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, March 2 (Reuters) - The U.S. dollar fell against
most currencies on Friday, dropping to its lowest in more than
two years against the yen, as President Donald Trump's proposal
to impose hefty tariffs on steel and aluminum imports raised
prospects of a trade war that could prove damaging to the U.S.
    Friday's sell-off came just as the dollar had risen to
multi-week highs on the back of strong data and an upbeat view
on the economy from Federal Reserve Chairman Jerome Powell,
which reinforced expectations of three or more interest rate
hikes this year.
    "The (tariff) move risked triggering a global trade war and
could have significant unintended consequences for the U.S.
economy," said Joe Manimbo, senior market analyst, at Western
Union Business Solutions in Washington. 
    Trump announced on Thursday he would impose heavy tariffs on
imported steel and aluminium to protect U.S. producers, risking
retaliation from major trade partners such as China, Europe and
    The dollar fell to 105.26 yen, the lowest since
November 2016 and was last down 0.8 percent at 105.37. Against
the euro and sterling, the yen was up 0.3
and 1.1 percent higher respectively.
    The yen also rallied after Bank of Japan Governor Haruhiko
Kuroda surprised currency markets by saying the central bank
would consider an exit from its ultra-easy monetary policy if it
met its inflation target in the year ending in March 2020. That
helped the yen higher against the euro and sterling.
    The dollar was already on the back foot before Kuroda spoke,
having pulled sharply back from six-week highs after Trump's
decision to impose tariffs took the wind out of the greenback's
week-long recovery.
    The dollar index, tracking it against a basket of major
currencies, fell 0.4 percent to 89.935.
    Bilal Hafeez, a macro strategist at Nomura in London, said
Trump's move was much more aggressive than tariffs imposed by
his most recent predecessors. 
    Barack Obama imposed tariffs on Chinese steel imports in May
2016 and George W. Bush against EU steel imports in March 2002.
Those moves saw the dollar fall 1.5 percent and 6 percent
respectively in the subsequent months.
    "The contours of the dollar reaction will likely depend on
the reaction of other countries to these tariffs... The more
powerful force could be the withdrawal of capital flows to the
U.S.," he wrote in a note.
    The euro, meanwhile, was up 0.5 percent versus the dollar,
with the focus on Sunday's Italian parliamentary election and
the level of support for populist agendas that could have a
wider impact on the European Union.
    Currency bid prices at 10:24AM (1524 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Euro/Dollar      EUR=        $1.2327        $1.2267     +0.49%         +2.75%      +1.2332     +1.2252
 Dollar/Yen       JPY=        105.3400       106.2300    -0.84%         -6.50%      +106.2900   +105.2600
 Euro/Yen         EURJPY=     129.86         130.32      -0.35%         -3.94%      +130.4300   +129.5800
 Dollar/Swiss     CHF=        0.9356         0.9417      -0.65%         -3.97%      +0.9424     +0.9339
 Sterling/Dollar  GBP=        1.3778         1.3774      +0.03%         +1.97%      +1.3816     +1.3757
 Dollar/Canadian  CAD=        1.2879         1.2836      +0.33%         +2.40%      +1.2894     +1.2819
 Australian/Doll  AUD=        0.7747         0.7754      -0.09%         -0.71%      +0.7773     +0.7738
 Euro/Swiss       EURCHF=     1.1535         1.1553      -0.16%         -1.32%      +1.1560     +1.1497
 Euro/Sterling    EURGBP=     0.8944         0.8903      +0.46%         +0.69%      +0.8951     +0.8896
 NZ               NZD=        0.7236         0.7247      -0.15%         +2.12%      +0.7279     +0.7227
 Dollar/Norway    NOK=        7.8091         7.8418      -0.42%         -4.85%      +7.8858     +7.7650
 Euro/Norway      EURNOK=     9.6263         9.6214      +0.05%         -2.26%      +9.6885     +9.5478
 Dollar/Sweden    SEK=        8.2556         8.2476      +0.59%         +0.66%      +8.2764     +8.2316
 Euro/Sweden      EURSEK=     10.1780        10.1186     +0.59%         +3.44%      +10.1831    +10.1140
 (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by
Saikat Chatterjee in London
Editing by Bernadette Baum)
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